Why you need liability coverage for your home business

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CGL insurance

For more information on this type of coverage, visit our CGL insurance page.

Be honest, you’ve spent years building your business. Long days, hard work and big investments all went into making your dream a reality. How would it feel if one small accident derailed all of your success? The truth is, 40% of small businesses won’t recover after a disaster. Lawsuits against your business are not only time consuming, they can also be very expensive and threaten your relationship with your customers. There are many reasons why you need liability coverage for your home business. Liability is perhaps the greatest risk to your home-based business. Depending on the type of business you operate, you should consider the following liability coverages:

  1. Commercial general liability coverage.
  2. Technical errors and omissions coverage.
  3. Product liability coverage.

The value of liability coverage for your home business

What is commercial general liability insurance?

You may be thinking to yourself, “I’m covered by my home insurance policy if anything goes wrong,” but that isn’t necessarily the case. A home insurance policy may provide coverage for things like books, tools, and equipment necessary to run your business, but you’ll need additional coverage to alleviate potential losses. Commercial general liability (CGL) insurance is designed to cover damages that your business is found to be legally liable for as a result of bodily injury or property damage to third parties. This includes when you and your staff are conducting business off-site.

A CGL policy can help mitigate your loss when your business is found legally liable for an injury or property damage to a third party.

Situation 1: A client falls while walking up the steps to your home, and files a lawsuit against your company.

The liability on your home insurance policy will cover a guest injured on your property, but it may not if the person injured is a customer or supplier who’s on your premises for business-related reasons. You’ll need CGL coverage to mitigate claims made against you arising from property damage or bodily injury to a third party. A CGL policy can help protect your business against lawsuits arising from a client slipping, tripping, or falling in your workplace.

What is technical errors and omissions (E&O) coverage?

Being sued can be a very stressful time for any business owner. A lawsuit brings with it concerns over financial stability as well as loss of reputation. While a commercial general liability policy can provide coverage in the event of property damage or bodily injury to a third party, it provides no coverage if that bodily injury or property damage is caused by a professional service you provide. In order to safeguard your business, you’ll likely need to obtain a Technical Errors & Omissions Liability insurance policy, which is designed to provide liability coverage if your customers incur a financial loss due to errors or omissions in your professional services.

Situation 2: You’re an independent consultant working out of your home. You’ve been accused of missing a deadline for work resulting in a financial loss for your client. You’re now being sued for $500,000.

Typically when beginning a project, deadlines are set out between you and your client. Often times this is outlined in a contract. If you fail to meet the agreed upon or contracted deadline, and the delay causes a financial loss to your client, they may file a lawsuit against your company. In this type of situation, you’d look to your E&O coverage to help with the legal costs associated with the lawsuit.

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What is product liability?

Product liability refers to situations where a customer claims an issue with your product caused them bodily injury or property damage. Design defects, manufacturing defects and marketing defects can all lead to a product liability lawsuit against your company. If the issue behind the bodily injury or property damage can be traced directly back to your company and your product, you may be found legally liable. This is particularly important for retail small businesses including bakeries, clothing stores, florists, restaurants, gift shops and coffee shops. It is also important for businesses that provide products to other businesses such as raw material suppliers and equipment suppliers.

A strong product liability policy will help protect your business from legal costs if your product is found legally responsible for bodily injury or property damage to a third party.

Situation 3: You own a coffee shop, and a customer claims that your red velvet cupcakes caused them bodily injury, which resulted in them missing work.

If your coffee shop, restaurant, bakery or other small business is accused of selling food or beverages that make a customer sick (i.e. cause bodily injury), you could be on the hook for legal expenses in the event of a lawsuit, and payments made to third parties as a result of unintentional negligence. The right product liability insurance will help with your legal costs in the event of a covered claim.

If you’ve read one of the above scenarios, and thought to yourself, “That could very easily happen to me, and I don’t want to be tangled up in an expensive lawsuit,” then you should be looking into liability coverage for your business. TruShield offers comprehensive coverage unique to your small business’ needs.

Get the coverage you need. Answer a few online questions for an instant quote.

This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information.